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Techno-economic Model for Broadband Copper Access Life-cycle

Techno-economic Model for Broadband Copper Access Life-cycle. Jasmine Holmström 10.1.2013. Supervisor: Heikki Hämmäinen. Contents. Motivation and background Research Objectives Methods Plan Input scenarios Results Conclusion. Motivation.

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Techno-economic Model for Broadband Copper Access Life-cycle

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  1. Techno-economic Model for Broadband Copper Access Life-cycle Jasmine Holmström10.1.2013 Supervisor: HeikkiHämmäinen

  2. Contents • Motivation and background • Research • Objectives • Methods • Plan • Input scenarios • Results • Conclusion

  3. Motivation • Broadband data rate requirements are increasing in Finland • Copper access network’s capacity is limited • Ageing of a copper cable slowly decreases connection quality and increases costs • Copper is not used in building new networks anymore • Future capability of copper access network should be studied

  4. Research objectives Research question: How can the life-cycle of copper network for broadband services in Finland be defined with techno-economic modeling? What is the life-cycle according to the model? Other objectives: • Determine possible alternative technologies for copper access network • Define comparison scenarios for copper access • Study copper access network capability and profitability compared to alternatives

  5. Research methods • Life-cycle is defined with scenario-based techno-economic modeling • Model is constructed according to background information gathered through: • Literature review • Expert interviews

  6. Research plan • Define mobile capableareas (rural) • Examineattractiveness of wirelessbroadband to customers (technicalcapability) • Inspectsituationfromoperator’sperspective (economiccomparison) • Definepotentialfiberaccessarea (sub-urban) • Calculateapproximatepaypackperiods, NPV’scashflows of fiberaccessinstallationscenario • Defineareaswherefiberaccess is used (urban) • Examine DSL possibilities to survivenext to fiber  Coppernetwork is expected to havelivingspace in betweensub-urban and rural.

  7. Input scenarios Copper access network life-cycle is being examined separately for different types of areas by the aid of competition scenarios. These scenarios are: • Rural areas • Copper access vs. wireless access • Sub-urban areas • Copper access vs. future fiber access • Urban areas • Copper access vs. fiber access

  8. Area definitions • Rural • DSL max speed below 8 Mbps for 3G replacement • DLS max speed below 24 Mbps for 4G replacement • Household density below the maximum radio capacity • Sub-urban • Defined according to most probable values • Sensitivity analysis finally defines the area • Urban • Comprise of current fiber access households

  9. Wireless broadband radio capacity

  10. Results: Rural • DSL access lines could be replaced by 3G broadband in rural areas that are defined as: • Household density is below 1.5 • DSL access line maximum data rate is below 8 Mbps • 4G technology would allow DSL access line replacements in wider areas: • Household density is below 3.23 • DSL access line maximum data rate is below 24 Mbps

  11. Results: Rural continues… • Financial benefit is gained if DSLAM site is wholly emptied • Migration from rural to urban areas wider mobile capable area • Copper cable perishing decrease DSL data rates  Wireless broadband is considered a better option

  12. Results: sub-urban The profitability of DSL network is calculated according to average type of sub-urban network area. With pessimistic cost evolution assumption the cash flows seems to turn negative in 2016 for CLEC and 2017 for ILEC. The cash flow analysis of FTTx installations. Resulting: NPV -90702 € IRR = 8 %

  13. Results from sensitivity analysis • Sensitivity analysis was made for the parameters that were most uncertain. • Risk factor seems to be ARPU value. • Fiber access installation become profitable: • if installation meters are below eight meters. • if penetration rate would be 20 % greater • if tariffs are increased 10 %

  14. Risk analysis Case 1 Investment risk is 61 % . Case 2 Investment risk is 51 % .

  15. Results: Urban • Copper access can compete with fiber access in short distances • VDSL2 offer 100 Mbps below 300 m loop length • Copper access line rent is cheaper than fiber access line rent for competitive operators • Copper access lines are maintained as long as there are enough customers to cover the maintenance costs (cash cow)

  16. Conclusion • Living space of copper access network is narrowed from two directions • Fiber access spreads from densely populated areas • Mobile broadband spreads from rurally populated areas • Ageing decreases capability of a copper cable • Copper access loop lengths are shortened • Errors and maintaining costs increase

  17. Copper access living space… • In the future, copper access is in use in the areas which: • Population density is over 1.5 (3G capacity)and later over 3.23 (4G capacity) • Loop lengths are longer than 8 m/hh and later even more as digging technologies improve e.g. micro trenching • Rival areas are renewed with fiber first and • lowest DSL data rate areas are replaced with wireless first

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